Taxation In Rural Areas: Its Operational Effectiveness And Problems (A Case Study Of Baruten Local Government)

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Taxation In Rural Areas: Its Operational Effectiveness And Problems (A Case Study Of Baruten Local Government)


Abstract


Taxation according to Collins English Dictionary defined it has a compulsory financial contribution imposed by a government to raise revenue, levied on the income or property of person or organisaition, on the production cost or sales prices of good and services. The study was carried out in Baruten Local Government Area, Kwara state. To find out taxation in rural area, its operation, effectiveness and problem.

The objective of this study is to survey and analyze as much as possible and various types of tax operation in Baruten Local Government Area of Kwara State in particular and in Nigeria in general and method of tax collection and enforcement procedure under the law. The study will also assess the evaluation of the effectiveness of the tax collection and enforcement procedure. In view of this some recommendation were made based on findings from the study which made it as a step towards of findings a lasting solution to a lack in the collectable revenue through tax evasion, kwara state government should among other things try the people through the necessary channels on the use and important of taxes so that they will be encourage to pay sub-sequent taxes.


Table of Content


Title page
Certification
Dedication
Acknowledgement
Abstract
Table of Contents
Chapter One
1.1 Introduction/Background of the study 1
1.2 Statement of Problem 3
1.3 Aims and Objectives 5
1.4 Methodology of the study 6
1.5 Hypothesis 7
1.6 Significance of the Study 8
1.7 Scope and Limitation of the study 8
1.8 Organization of the study 9
1.9 Definition of terms 10

CHAPTER TWO
2.1 Historical Background of the case study 13
2.2 Organization structure 14
2.3 Literature Review 17
2.4 Classification of taxes 21
2.5 Purpose of taxation 25
2.6 Principle of taxation 27
2.7 Uses of taxation 29
2.8 Problem of taxation 30
2.9 Importance of taxation to the people of Baruten
Local Government Area 32
REFERENCE 33
CHAPTER THREE
3.1 Research Methodology 34
3.2 Method and operation of taxation 35
3.3 Sample Design 36
3.4 Sample size 37

CHAPTER FOUR
4.1 Presentation and analysis of data 39
4.2 Findings 48
4.3 Suggested and solution to the problem of tax collection 50
CHAPTER FIVE
5.1 Summary 53
5.2 Recommendations 54
5.3 Conclusion 55
Bibliography 57
Questionnaire


Chapter One


General Introduction

1.1 Background of the study

According to oxford dictionary, it defined tax as a money that have to be paid to the government so that they ca pay for public services

Taxation has been associated with developments. For instance the revolt of Benin in 1984, the Abia women not of 1924 in Nigerian etc.

The history of man has shown that man has to pay in one form or the other, that is either in cash or in kind. Initially taxation was paid to the chieftain and later on to a form of organized government.

Taxation is almost as old as the earth itself. These was tax mentioned many times during the day of our fore fathers.
Nearly 2000 years age, for instance there was a decree from Caesar Augustus “that the whole world should be taxed. Though the use to which they have been put and the sources from which they arise changed over the ages, the principles very old.

Taxation has been practice in the ancient Greece and Rome where the extortion of tribute from conquered people from foreigners living within Greece and Rome from sales. But, no account as taken of any of the principle which guide the tax administration in modern democratic society such as quantity of taxation and ability to pay etc.
In Nigeria taxation was first practiced by our forefather in a very primitive methods. For example, the wealth of a whole community may be assessed and taxed accordingly.

The methods were changed and they were eventually taken over by laws and regulation and even by military decrees.

The most popular laws among others are the following:

  1. Income tax management act (ITMA) of 1961 as amended which provides the basic rules for taxing income of persons other than companies.
  2. Company income tax act (CITA) of 1979 for taxing company income.
  3. Petroleum profit tax act (PPTA) of 1959 as amended which provides the basic rules taking profit on petroleum operation
  4. Industrial development income tax relief act of (1971)
  5. Capital gains tax act (CGTA) of 1967 administered by the federal Board of inland revenue for taxing the gain on the sales of asset (fixed) of companies and non-residents.
  6. Capital transferred tax act of 1979
  7. Personal income tax act (Lagos) 1961 as amended
  8. Finance law 1962 as amended (Northern State)
  9. Western state income tax law 1957 as amended (old Bendel state) it was in pursuance of these laws that revenue offices for collection of taxes came into being either under the federal state or local government .

1.2 Statement of Problems

Generally all these have advantages will have one defect or the other. As a result taxation in rural areas particularly have its’ defects in Baruteen Local government Area.

Though there used to be little or no problem as per assessment but problem emerge when collecting the taxes due from those that have been assessed and declared fit tax payment.

Another major problem of tax administration in Baruteen Local Government is that despite the fact that the people are allowed to pay in part, some still fail to pay. By this the officer have to go round imploring them to pay.

Also there is no enough vehicle for traveling from one place to the other and this poses a great problem for the officer to travel from the headquarter to some of the villages for assessment and collection. In this regard, the staff some times trek to some village before they could assess and collect from those villages.

It was in pursuance of these laws that revenue offices for collection of taxes came into being either under the federal, state or local government.

It is observed that in Baruten Local Government Area, most people or tax payers were just paying the tax levies without knowing how it was utilized. The tax payer believed that they were only paying the money to the government for nothing.

As a result of this, mistaken motion, the researcher felt it is very necessary to carryout this study to normalize the issue. it is therefore necessary to correct the misconception of the tax payer in Baruten Local Government Area.

The need is also necessary to study the problems facing the tax authority in Baruten Local government area and suggest possible ways of effecting good and efficient way of collecting tax within the Beruten local Government Area and Kwara state in general.


1.3 Aims and Objectives

The aims and objective underlying this study can be summarized as follows:

The researchers intention in this project is to survey and analyze as much as possible various types of tax operation in Baruten Local Government Area of Kwara state in particular and Nigeria in general and the method of tax collection as well as enforcement procedure under the law. Also efforts have been made to identify the problem and difficulties encountered by the authority in charge and that tax payers. The study also accessed the evaluation of the effectiveness of the collection and enforcement procedure.

And finally, it has step towards finding a lasting solution to a leakages in the collectable revenue through tax evasion.


1.4 Methodology of the Study

Based on the topic of the research both primary and secondary sources of data collection were used.

The primary source include questionnaire that were distributed to tax payers who can read and write in those town mentioned above and personal interviews held with the tax official at Gwanara.

The secondary source include publication on the local government secretariat relevant articles in journals, business newspapers and textbooks.


1.5 Hypothesis

The following hypothesis were formulated for the purpose of guiding the studied.

  1. The operational of taxation in Baruteen Local Government Area of Kwara state not effective enough”
  2. The tax received from tax payers is not judiciously used for the benefit of communities in Baruten Local Government Area.
  3. The community is ignorant of the consequences of tax avoidance and tax evasion.
  4. The civil servant respond more to taxation than the farmers and traders in Baruteen Local Government Area.
  5. There are more farmers than traders in Baruten Local Government Area.
  6. Company income tax is not in operation in Baruten Local Government Area but personal income tax which is taxes on individuals.

1.6 Significance of the Study

The significance of this work is to let the people of Baruten Local Government Area know the reason while tax have been impose and to let them know that tax collected from part of source of revenue to the Local Government. And that it also form a base of what the federal Government and tax area used to re-distribute income and to discourage consumption of some goods.


1.7 Scope and Limitation of the Study

The study of taxation in rural area, Baruten Local Government Area of Kwara state in focus was extensive. Since there are many villages and towns in the local government.

However, the extent of this project is limited of the study of the operation, effectiveness and problems of personal income tax in the local government since there are no companies which could be taxed.

Also, Gwanara, Gobbo and Ninguumi are taken as my sampling population since what operate there operates in other village of the local government. It should also be borne in mind that the people of the local government (the eligible tax payers) are mostly farmers and traders. The limit of the research is on the problems encountered by the tax collectors

In the villages mentioned above and the tax from the payers and the method used in collecting.


1.8 Organization of the Study

Chapter one deal with the background of the study, statement of problem, purpose of the study, hypothesis, significance of the study, scope and limitation and definition of terms

While chapter two deal with the Historical background of the case study, the organization structure of Baruten Local Government Area, literature reviewed, classification of tax, purpose of tax and used of tax. Principles of tax.

Chapter three deal with research methodology, sample and population of the study sources of data, method of data collection and research problem.

Chapter four is about data presentation and analysis, the method and operational of taxation problem of tax collection and importance of taxation to the people of Baruten Local Government Area of Kwara State.

While the last chapter which is chapter five deals with summary of findings, recommendation, conclusion and bibliography.


1.8 Definition of Terms

Tax Avoidance:

Tax avoidance is a deliberate act of the tax payer to pay less than he ought to pay legally. This can be achieved through such means as loopholes in existing taxation.

Tax Evasion:

This is a deliberate manipulation of tax law of an illegal means in trying to minimize tax liability, such illegal acts include failure to keep proper and adequate record exclusion or certain income and offering bribes to tax collectors/officers.

Tax Delinquency:

This refers to failure of tax payer to pay obligation on the day is due. It is inability to pay tax because of inadequate funds.

Tax Authority:

This is a body of person that responsible under the law of a state or federal imposing tax on person for the administration of laws.

Tax Base:

This is the object on which tax is based on calculation, such as income, property or the individual.

Tax Rate:

This is the percentage of the value of the tax base that must be paid in tax, or the amount of tax charge in the case of a direct poll tax.

Tax Income:

This can be defined as all accreditation to a tax payer’s wealth, without regard to how it is obtained and how it is used.

Taxable Income:

This is the amount to which the appropriate tax rate is applied to determine the tax ability.

Tax Payer:

This is the person who will pay the tax to the tax authority.

Community Tax:

This is tax payable by all adult males not liable to pay income tax.

Tax Law:

Is the body of rules under which government have a claim on tax payer for par of their income or property.

P.A.Y.E:

Pay as you ear

L.G.A:

Local Government Area

I.T.M.A:

Income tax management

C.I.T.A:

Company income tax act

C.G.T.A:

Capital gain tax etc.


Chapter Five


5.0 Summary of Finding, Conclusion and Recommendation

5.1 Summary of Finding

Baruten Local Government Area was created by former Military president Rtd general Ibrahim Badamosi Babagida in August 27, 1991 in Kwara state. Baruten Local Government Area has its headquarter in Kosubosu and has other major town and villages such as Gwanara, Okuta, Ilesha-Baruba, Yashikira, Gobbo, Ningurumi and Gamoru, e.t.c
Taxation is grouped under direct and indirect taxes. Direct taxes include personal income tax, poll tax and company profit taxes. They are direct because they are imposed directly on payer. Indirect taxes include import and export taxes levied on commodities which is also known as excise duty, primary and secondary data were collected in this study. Primary data was collected from the tax payers and the tax officials of the tax office through questionnaire and interviews. While secondary data was gathered from textbooks, newspapers and journals.


5.2 Recommendation

However, the day to data successful operation of organizations, government parastatals or public or private limited liability companies is based on source of finance available to that organization. Therefore, there is no doubt that the administration of Baruten Local Government Area in particular and Kwara State in general be smoother then it was used to be if the problem facing/affecting the effectiveness of its taxation policies are taken into consideration.
In view of this, the following recommendation should be taken into consideration.

The Kwara State Government should among other things try to give enlightenment campaign to the people through the necessary channel on the uses and importance of taxes so that they will be encourage to pay subsequent taxes.
Also the government should employ more workers and get them trained in the field; none of these staff should be transferred without replacement.

It is the hope of this researcher that taking into consideration the recommendation to the problems of tax administration in Baruten Local Government Area of Kwara State, the state government would realized that more taxes would be collected and will thereby increase the revenue of the state government to perform the various functions.


5.3 Conclusion

Having highlighted some of the problems and suggested solution to the Baruten Local Government Area, government too should rise up to the challenges, their impact should be felt by the people of the area. They should penetrate more into the social areas, provider some basic social amenities that will encourage the people to contribute no matter how small to the development of their areas and the nation as a whole. Government should all the tax authorities with adequate manpower, materials and allow them to stand on their feet.

There should be staff welfare. There is no doubt that an officer who is not well remunerated will surely perform below expectation, good office accommodation, working tools, provision of transport facilities for tax drive and promotion s at when due in conformity with workers of other local government area will encourage better performance.

More enlightenment of the masses on the importance of paying taxes. Facilities to be provided and their free access to any tax officers on matter concerning tax affairs should also be intensified.

The actual tax collected through PAYE (pay as you earn) be collected by them. Although the direct collection procedure also result to some substantial amount of money being collected, lack of co-operation from self-employed tax payers and administrative error act as bottle-neck to effective collection of the amount estimated.


Taxation In Rural Areas: Its Operational Effectiveness And Problems (A Case Study Of Baruten Local Government)


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Taxation In Rural Areas: Its Operational Effectiveness And Problems (A Case Study Of Baruten Local Government)


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